Mass. Reaches $60 Million Settlement With Goldman Sachs02:20

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Massachusetts Attorney General Martha Coakley has reached an agreement with Goldman Sachs for its role in the foreclosure crisis. It appears to be the first of its kind in the U.S. because it goes after the investment banks that knew the loans were bad, and bought them anyway.

When Attorney General Martha Coakley began investigating the foreclosure crisis, she zeroed in on the role that Goldman Sachs and other investment banks played in creating the market for bad loans.

"We looked at how securitizers may have facilitated the origination of unfair loans in Massachusetts," Coakley said. "We've made the determination and our courts have agreed that many of these loans were unfair and destined to fail."

Under the settlement, Goldman Sachs will spend about $50 million to reduce the principal for about 700 homeowners whose mortgages are held by Goldman.

The settlement also orders a Goldman-owned company, Litton Loan Servicing, to modify thousands of other mortgages. The state will also receive $10 million under the agreement.

Goldman Sachs says it's happy to have the case resolved. It won't say whether it's negotiating similar settlements in other states. However, Vincent Valvo, editor of Banker and Tradesman, says it's unlikely.

"Martha Coakley has been aggressive at going after the players in the subprime debacle," Valvo said. "Interestingly, not a lot of other states have been following her lead."

And for her part, Attorney General Martha Coakley says she can't tell whether the settlement will set a precedent.

"There are so many unprecedented things in this whole economic crisis," she said, "that it's hard to tell whether anything we do or don't do is a precedent."

However, Valvo says at least in Massachusetts, this agreement could signal more to come.

"If you're one of the other major investment banks that were handling these kinds of loans you probably ought to be getting ready to write a check to the Commonwealth of Massachusetts," he said.

Coakley won't say whether she has settlements with other banks in the pipeline, but says the investigation into the foreclosure crisis is ongoing.